Renting to a family member & housing benefit

ninab_2

I've read quite a few conflicting posts on this subject so still no clearer, can anybody please clarify:

My husband and I will be purchasing a property within the next few months on a buy to let which we were going to rent out, we have been planning this for some time and have been saving for a deposit. My daughter who is now pregnant and on her own has had very little help from the local council they have only offered her BB accommodation, shes homeless.

Is there a possibility she could live in our BTL property and claim housing benefit?

DomRavioli

It could be classed as a contrived tenancy. Best thing to do is speak to your local authority to get their rules - usually if the house is bought specifically for that person, it can come under the contrived rules as it is not a general private let, has not been let previously to other tenants as a private let who are not related.

If it is classed as such, then local housing allowance won't be paid.

From what you have said, it would be classed in my LA as a contrived tenancy for the reasons above and more.

xylophone

Does your BTL mortgagee allow letting to family?

http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/housing_benefit_if_renting_from_a_family_member

RAS

Unless she is over 35, until the birth she is only entitled to LHA on a shared room rate. With the baby the maximum she will get the LHA rate for 2 bedrooms.

If you charge her less than a commercial rent it is a contrived tenancy. And you would need to be prepared to evict if she failed to pay the rent.

ninab_2

I will contact my LA to clarify thanks. Seems rather frustrating though that there are little or no social homes avail hence the BB option and she will be entitled to housing benefit anyway if and when a home becomes avail to her. This would surely be the better option all round, we would be renting out anyway and this option would mean she wont require the social housing.

StuC75

No doubt its the best solution for you and the daughter.

Its contrived in the sense of looking for society to be not only providing for your daughter, but then in essence have them paying the mortgage for the BTL..

Afterall why not just let her live rent free in the property that you are buying?

ninab wrote: »

I will contact my LA to clarify thanks. Seems rather frustrating though that there are little or no social homes avail hence the BB option and she will be entitled to housing benefit anyway if and when a home becomes avail to her. This would surely be the better option all round, we would be renting out anyway and this option would mean she wont require the social housing.

tom717

RAS wrote: »

If you charge her less than a commercial rent it is a contrived tenancy.

I don't understand this rule. I thought a contrived tenancy meant a tenancy that exists to take advantage of housing benefit, how does charging less do that?

nannytone_2

charging less would indicate that that the only reason for buying the property would be for the daughter.
if it is a 'genuine' let then the landlord would be looking to maximise the rental income by charging the LHA rate plus a top up.

the LHA rate only covers the lowest 30% of average rents for any area, so for a landlord to charge even less than this looks more than a bit suspect considering they have never had a rental property before

ninab_2

Society will be providing for her if she goes down the route of LA BB accommodation and whenever she will may be housed because she will need to claim housing benefit.

We cannot afford to let her live there rent free, we will be buying a property on a BTL with a view of placing a tenant in it to cover the mortgage.

StuC75 - I totally understand where your coming from on the subject of expecting society to pay for the mortgage but she needs to live somewhere!

princessdon

ninab wrote: »

I will contact my LA to clarify thanks. Seems rather frustrating though that there are little or no social homes avail hence the BB option and she will be entitled to housing benefit anyway if and when a home becomes avail to her. This would surely be the better option all round, we would be renting out anyway and this option would mean she wont require the social housing.

If you had already bought and rented it would be easier, the timing of the purchase is what makes it more difficult. You see a sensible solution others see you getting your mortgage paid by tax payers.

You'd need a formal agreement, treat her like any tenant (eg deposit and put her deposit into a scheme, eviction clause, be prepared to evict etc. if those are in place it will help show none contrived, your negative is timing as I said earlier.

nannytone_2

ninab wrote: »

Society will be providing for her if she goes down the route of LA BB accommodation and whenever she will may be housed because she will need to claim housing benefit.

We cannot afford to let her live there rent free, we will be buying a property on a BTL with a view of placing a tenant in it to cover the mortgage.

StuC75 - I totally understand where your coming from on the subject of expecting society to pay for the mortgage but she needs to live somewhere!

yes society would be providing for her ....
but by you being the landlord, society would be benefitting you as well.
this is where the concern lies.

if you already had a rental property that you let out, and your daughter then moved in, there wouldnt be so much of an issue as you would have already been an established landlord.
but to may thidd will look like you have bought the property with the intention that your daughter rents it.
so you gain a house and she gains a home, uet it costs neither of you anything